Various approaches to distributing emissions allowances spark a heated debate over costs and fairness, but the allocation methodology doesn’t determine whether a regulatory scheme will reduce...
PJM Addresses Local Supply Issues
Electric shortages and the generation overbuild continue to co-exist.
into the 765-kV transmission line. 5
AEP already has filed the proposal with the PJM Interconnection, FERC, and the DOE. PJM announced that it intended to analyze the project’s potential for reducing congestion as well as its impact on capacity pricing and other market elements. In July 2006, FERC approved the requested transmission incentives consistent with its recent transmission incentive ratemaking rule. The incentives approved for AEP include: (1) enhanced return on equity; (2) full recovery of construction work in progress (CWIP); and (3) pre-construction and pre-operation cost recovery.
AEP requested that the DOE designate the proposed route as a “national interest electric transmission corridor” (NIETC) under the Energy Policy Act of 2005. The new law allows transmission developers of projects in these corridors to seek the necessary permits from FERC to move forward if states fail to act on the projects within a year or lack authority to site the facilities. It also places conditions on their approvals.
Less than a month after AEP’s announcement, Allegheny Energy proposed building a 330-mile, 500-kV transmission line that would increase west-to-east power transfers through its territory by 3,800 MW. The company hopes to bring the first sections of the $1.4 billion project into service by 2013. Called the Trans-Allegheny Interstate Line, this project would originate from Allegheny’s Wylie Ridge substation in the panhandle of West Virginia, run through southwestern Pennsylvania, then through north-central West Virginia before entering western Maryland, and reaching its end point at a new substation near Kempton in central Maryland. It would remain in Allegheny’s territory throughout the route.
Allegheny emphasized that Trans-Allegheny was not meant to compete with AEP’s project, since the lines would proceed mostly on different paths and terminate in different states. Similar to AEP, Allegheny filed a request with FERC for incentive rate treatment and asked the DOE to designate its project as an NIETC. FERC granted the Trans-Allegheny project the same transmission pricing incentives as those approved for AEP Interstate in addition to recovery of all prudently incurred development and construction costs if the project was abandoned for reasons beyond Allegheny Energy’s control.
In addition to AEP and Allegheny Energy’s proposals, Pepco Holdings Inc. (PHI) recently proposed the construction of a 230-mile, 500-kV interstate transmission line—referred to as the PHI Mid-Atlantic Power Pathway. The line would originate in Northern Virginia and would travel through Maryland and the Delmarva Peninsula, ending in New Jersey. Filed for inclusion in PJM’s latest RTEP, this $1.2 billion project—to be completed by 2014/2015—represents the only south-to-north proposal. The Mid-Atlantic Power Pathway is expected to improve reliability significantly and to relieve congestion in eastern PJM, complementing AEP and APS west-to-east proposals.
PJM’s first 15-year RTEP recommended the evaluation of about 10 proposed transmission projects estimated to cost $10 billion, including the three transmission projects proposed by AEP, Allegheny, and PHI. Given sponsors’ filing of additional siting and environmental studies, PJM expects to make decisions on these projects in 2007.
In its recent report on national transmission congestion, the DOE has identified the area between New York City and Northern Virginia